There comes a time in every landlord’s career when they make the decision that they want to sell their buy-to-let property. This can be because they need to release some cash, want to downsize their property portfolio or simply no longer wish to be a landlord. Whatever the reason, there are some considerations that need to be taken into account when looking to sell a buy-to let property and in this article, we will walk you through the process.
Tenant in situ or vacant possession?
This is perhaps the most difficult decision to make. It is better to sell the property with the tenants in place or whether to sell the property as vacant. There are pros and cons of each approach depending on your personal needs.
Selling with tenants in situ
It is perfectly legal to sell your property with the tenants in residency. In fact, within the fixed term of the contract, you cannot evict a tenant if you want to sell your property and, even if the tenancy is a rolling periodic tenancy, you still have to give due notice to the tenant to evict them using a section 21 notice. It is important to note that under the renter’s reform bill section 21 no fault evictions, under which an eviction notice due to the landlord wishing to sell the property would have fallen, are to be abolished at some stage in the future making it harder to evict a sitting tenant when you want to sell the property. In addition to this, keeping the tenants in place allows you to keep earning money on the property right up until you sell it. Finally on the pros side, there are plenty of investors who are happy to buy an investment property and would prefer to have the property as an ongoing concern and earning them money from day one and the transaction is likely to be faster if the tenant does not need to move out. There are, however, downsides! Selling a property with tenants in place reduces the target market for the sale to investors and existing landlords. This smaller market might mean that it is harder to find a buyer and could also reduce the market value of the property as there is limited competition to buy it.
Selling with Vacant possession
The main advantage of selling the property with vacant possession is that it opens up the property to the entire buying market which should secure a decent price and healthy competition. It is worth bearing in mind, if you are hoping to sell your property to buyers, other than landlords, you may need to invest in some modernisation in order to appeal to them. There are some disadvantages to selling with vacant possession: Unless the tenancy is coming to an end anyway, you will have to wait until the fixed term has ended and then evict the tenant using the correct notice period, which currently is at least 2 months. Even after you have given notice to evict, the tenant isn’t always guaranteed to assist with the sales process so you might have to wait until they have left before sorting any viewings. Finally, once the tenant moves out, there is the loss of rental income, leaving you to pay the mortgage until the property is sold.
What to prepare
If you are looking at selling with the tenants in situ, you will need to make sure you have all the relevant rental documentation in place, this will be the current contract, details of the deposit protection scheme under which the deposit is being protected, the right to rent documents, all the relevant safety certificates and, if applicable, any legal notices you have served on the tenant. Any new landlord or investor will need all of this information to make an informed choice and ensure a smooth handover.
Notifying the tenant
You do not need your tenant’s permission to sell your property, but at the appropriate time, as a matter of courtesy, it is advisable to inform them that you are selling and under what conditions: Tenant in situ or vacant possession.
Given the complexities of evicting a sitting tenant, the loss of rental revenue and the additional time taken to sell a vacant property, there are some very strong arguments to selling your buy-to-let property to another landlord with the tenants in place. The process tends to be quicker and smoother although the target market is smaller.
Whichever route you decide to take. Should you wish to sell a buy to let property we at Northwood can help! That might be contacting our database of landlords to see if the property would be a suitable addition to their portfolio or it might be helping you through a vacant possession sale. If you would like to discuss your options in more detail give one of our local property experts a call, you can find your nearest office here.
